Why Investing In Beauty And Wellness Brands Is A Profitable Idea?

Why Investing In Beauty And Wellness Brands Is A Profitable Idea?

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There is no denying that there has been something of a beauty boom in recent years - and it's not looking to slow down anytime soon, pandemic or no pandemic. The wellness and beauty economies are an estimated $532 billion, with more and more brands taking full ownership of customer experiences and getting rid of traditional advertising budgets to make way for the rise of influencers.  

Gone are the days where big multinational beauty corporations are leading the way. Tiny but mighty, smaller, digital, local brands are disrupting traditional wellness and beauty business models and conventions, becoming attractive to many investors as a result. Cutting out the expensive middleman alongside new sales techniques and ever-growing consumption, and emerging eCommerce trends mean that there has never been a more optimal time for investing and brands with a consumer-centric base online.

New opportunities 

Forward-thinking and cutting-edge, independent hair, beauty, and wellness brands push the limits of creativity through their innovative business models and marketing approaches, allowing them to appeal to a broader range of consumers that the big corporations previously could not. The beauty industry is a very personal market that enables brands to connect with their audiences in a way that other sectors cannot. 

There is, therefore, a constant need for new products and experiences tailored to various consumers and their beauty and wellness needs, from polygel kits to skincare products for sensitive skin. This also helps create more prominent brand visibility via greater customer engagement, with social media providing the perfect tool. Many new, independent brands are great at using direct-to-consumer models, creating relationships with younger generations in particular via their social media content. 

Furthermore, issues such as sustainability and relatability are becoming increasingly important to younger consumers, allowing brands to adapt business models and create online marketing strategies tailored to current issues that are important to their audiences, building trust.

Rapid growth  

The sector is rapidly growing, thanks in part to new spaces for businesses due to the rise of eCommerce marketplaces, and with it, high margins and a faster than average growth outlook of 13%. Typical gross margins range around the 60% mark, allowing companies to develop and invest in new products to diversify or even acquire other companies to expand their business empires. 

With the help of the latest technologies, brands are getting great at adapting to using artificial intelligence to sell their products, alongside the boom of social media marketing to increase brand awareness across many platforms, connect with their audiences, and market their products like never before. 

The rise in beauty influencers and bloggers sharing brand content on platforms such as YouTube and Instagram has also contributed to this growth in recent years, changing how many consumers are discovering new products and brands. Many companies recognize that an excellent digital marketing strategy is key to this rapid growth and development and are tapping into the power that influencers and brand ambassadors now yield. 

Frequency of purchase  

Unlike other commodities, tried and trusted products in the beauty sector tend to be repurchased once they have run out. Whether that's every month or every other month, you are almost guaranteed recurring revenue, and with it the stability that every investor wants, making it a safer and dependable option compared to other industries. 

Regular purchases improve the customer lifetime value, the metric of how valuable a customer is during the entire brand/consumer relationship, and is an excellent way of creating growth while driving up revenue. After all, it is quicker and more cost-effective to get a customer down the sales funnel to repurchase a product than it is to convert a potential customer into a fully-fledged consumer. 

Brand loyalty 

Beauty and wellness consumers are renowned for their brand loyalty and devotion. When it comes to products as personal as skincare and makeup, if they find something they like and work, they are potentially a devoted consumer for life - the ultimate goal for nearly every business. While trends within the industry come and go, consumers will always be ready to line up for their beloved failsafe skincare and beauty heroes, even when times are hard. 

Sales in the beauty industry went up by up to 3.2% during the last major recession of 2008-2009, and skincare sales rose significantly during the pandemic despite the lockdown closures of brick and mortar stores. While formulas and product effectiveness are undoubtedly important, in most cases, customers are loyal to the brand and not necessarily the product. 

Re-package the same Chanel lipstick formula, and you won't outsell the original even though the lipstick is the same. That's because brands matter in this industry, and just like packing and formula, they are part of the customer experience. When brands get this right and hit the nail on the consumer spot, little can stand in the way between the two, providing an unstoppable entry for investors.

Wrapping Up

The return on investment in the beauty and wellness sector can be unquestionably high, especially if you are lucky enough to be involved early on in the brand's development. Building sustainable brands that boast high customer engagement and loyalty are incredibly attractive financial opportunities for many investors in terms of returns and subsequent exit options, with many successful companies later being acquired by giant conglomerates in the beauty industry. 

These large companies are willing to pay big money to snap up their famous smaller counterparts, both in terms of getting rid of competition and expanding and adding to their current portfolios, allowing them to compete in previously untapped markets. With high margins, high recurrences, and the importance of wellbeing and self-care in our society, there isn't a shadow of a doubt that healthy investment opportunities exist in beauty and wellness brands today.

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ABOUT THE AUTHOR

Jennifer D
Jennifer D

Jennifer is a full-time content writing specialist. She has been closely monitoring the Vaping Industry trends for quite some time. Through her writing, she hopes to influence as many people as possible. She also likes traveling to different places. On her off days, she likes to spend time with her family, lift weights, and reading novels.

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